COMPANY TOWN

Drawing on Creativity

A Struggling Film Roman Tries to Reanimate Itself

In the last broadcast season, the tiny boutique in North Hollywood known as Film Roman Inc. produced almost as much animated television as the industry Goliath. While Walt Disney Co. churned out 183 half-hour episodes, Film Roman created 141 episodes of a wide range of programs, from Fox's two popular prime-time series, "The Simpsons" and "King of the Hill," to children's shows such as "Bobby's World," "Mortal Kombat," "The Mask" and "Bruno the Kid."

But the reliability and range of animation styles that are Film Roman's hallmarks have provided little protection against a wrenching realignment of the entertainment industry that has forced all independent producers to rethink their strategies.

Since a $33-million public offering in October 1996, shares in Film Roman have plunged to the $1 range, from $10 when they opened. Losses have mounted as networks have canceled its shows and made way for their own programs. Pressed against the wall, the board of directors in September brought in new management, relegating Phil Roman, the soft-spoken founder of the 14-year-old company, to a mostly creative role as chairman.

"This is the toughest time in all my years in the business," said Margaret Loesch, who after building News Corp.'s children's television business recently became the new president of Jim Henson Co.'s television group, an independent producer now trying to assemble its own cable channel to compete.

Most broadcast networks are now owned by major studios interested in assuring air time for their own programs, leaving independent suppliers to fight over the scraps. This "vertical integration" of production and distribution under single ownership has hit Film Roman's bread-and-butter business of television animation particularly hard.

Disney's takeover of ABC and the network's Saturday morning schedule derailed a plan under which DreamWorks SKG would have managed the block. Warner Bros. yanked product off of Fox to feed its own network, WB.

With expanding cable opportunities, the most powerful channel, Nickelodeon, typically demands ownership rights in its series, while the Cartoon Network draws upon resources of its sister Warner Bros.

The new Film Roman management is scrambling to adjust to the changing economics, leaning on foreign partners and computerized animation--which is cheaper than hand-painting--to reduce its risks.

"We will figure out a way to be in this business," said David Pritchard, the new president and chief executive. "But this won't be easy. It's really tough to get into the pipeline. Disney and Warner Bros. put so many people under contract I can't compete for talent. The only way I can win is by having a more creative edge and if I figure out how to do the job for less."

Other independents have sought the protection of major studios to survive. Jumbo Pictures, the creator of the "Doug" series, sold out to Disney, while Saban Entertainment and its "Mighty Morphin Power Rangers" merged with Fox Children's Network.

Even well-financed DreamWorks was forced to lay off television animators it had stockpiled to supply ABC after the business didn't materialize.

"Independent companies have been mortally wounded by vertical integration," Loesch said. "They can survive, but today they have to be as good at raising money and forging international co-productions as at the creative process."

Film Roman was already mid-stream in a corporate transformation when the landscape shifted. Phil Roman, the son of immigrant farmers from Fresno who had bootstrapped his way to success, had churned out more than $1 million in profits in 1994, mainly from contract animation work. But as digital technologies expanded television choices around the globe, he became eager to break into the big leagues of original production, creating his own characters and cashing in on their licensing and merchandising.

But getting programs to stick has been challenging. Film Roman was forced to write off $2 million of a $6-million investment in September when a new program for next fall, "The Blues Brothers: The Animated Series," was canceled by UPN after new management changed the direction of the network.

Entertainment sources say Film Roman, having had little experience in prime time, was naive in the deal it structured.

Last year, Fox canceled Film Roman's critically acclaimed "C-Bear and Jamal" despite a top ranking in its time period. Analysts viewed it as a sign that Fox would be supplying more of its own programming after merging with Saban, but the network said the ratings of the program simply couldn't justify its steep price.

"C-Bear and Jamal" may also have been a victim of declining licensing fees. Two years ago, networks commonly paid producers $200,000 to $300,000 per half-hour for high-quality animation that typically costs up to $400,000 to produce. Today, those fees are less than $100,000, forcing producers to make up the difference by pre-selling their shows internationally.